By Peter Zuk, an Associate with LeClaireRyan in the firm’s Alexandria, VA office.
In November 2018, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published a proposed rule to amend labeling regulations governing wine, distilled spirits, and malt beverages, 83 Fed. Reg. 60562 (Nov. 26, 2018). TTB’s stated intent is to reorganize and recodify the rules surrounding labeling in a new section and reduce the regulatory burden on alcoholic-beverage producers. The advertising regulations for all three industries would be unified in one Code of Federal Regulations section (27 CFR Part 14).
Comments are due by March 26, 2019. Comments and replies may be mailed to TTB or submitted electronically (https://www.regulations.gov/document?D=TTB-2018-0007-0001).
Many of the current regulations enforced by the TTB and its predecessor organization, the Bureau of Alcohol, Tobacco, Firearms and Explosives, have Prohibition-era roots and limit wine, spirits, and beer promotion. For instance, alcohol-products labels cannot contain the term “pre-war strength”—an antiquated reference to the time after World War I. The proposed reform removes this ban and takes other good-faith steps to modernize the rules so they are more in step with vast evolutionary changes in the three industries. It proposes updates to many sections on false and misleading statements and recognizes wine, spirits, and beer businesses’ increased use of commodity terms.
The proposal also acknowledges the significant changes have occurred in First Amendment jurisprudence. In particular, it notes U.S. Supreme Court’s Rubin v. Coors Brewing Co., 514 U.S. 476 (1995), decision, which held unconstitutional a ban on printing alcohol content on product labels. The Court’s decision did not, however, directly address other label terms commonly used by alcohol producers to advertise products.
Under the Federal Alcohol Administration Act (FAA Act), 27 U.S.C. § 205(e) and 205(f), for example, the TTB may prohibit false or misleading label representations even if the label assertion is factually accurate. This provision accords the TTB great latitude to restrict the speech of small alcohol producers for simply using a term the TTB subjectively finds misleading. In the proposed rule, the TTB explains that phrases such as “This wine doesn’t have the hoppy taste of beer” are acceptable but “bourbon-flavored beer” is not. The proposed examples do not clarify the limits of accepted language and, especially given the protective trend in Supreme Court commercial-speech jurisprudence since Rubin, may infringe on the First Amendment rights of those businesses making such truthful, non-misleading on-label statements.
Product labeling is often what sets one wine or spirit apart from another in a highly competitive market. A lack of consistency and clarity in the federal rules that govern such decisions can be ruinous, especially to smaller alcohol producers who can barely afford regulatory compliance counsel, let alone a constitutional expert. Delays due to labeling uncertainty or regulatory rejection also deprive consumers of new products.
The TTB merits praise for pursuing common-sense reforms through the proposed rule. However, the reforms reflect the agency’s continued misunderstanding of the vast changes in the alcohol industries, such as increases in the sharing of materials and techniques between wine producers, brewers, and distillers.
Interested parties, especially counsel for alcohol producers of all sizes, should provide comments urging TTB to clarify and alter the proposed rule so that it minimizes the chilling of constitutionally protected speech and limits unnecessary expenses.